Argentina has been hungry for an elevated presence in the world of energy production; the momentum was not previously there, but now they are coming in swinging. The three parties involved in this collaboration, all established players in the oil and gas sector, appear to be working toward the same end goal. At what level of coordination will the long-held ambitions of these three players to develop their respective LNG projects align?
A new beginning in an old setting
Argentina’s capital city was the site of the recent announcement regarding YPF, Eni, and XRG entering into a Binding Joint Development Agreement (JDA). While the announcement did represent a formal commitment to collaborate on advancing Argentina LNG, it appears to represent a fundamental shift in pace – a collaborative commitment to move the development process forward rather than merely a collaborative planning milestone.
The purpose of this JDA is to identify the best route to transport the vast quantities of shale gas currently being produced in the Vaca Muerta basin, and then liquefy and ship it to other countries. The JDA identifies that prior to exporting large volumes of LNG, the parties must identify a common route or pipeline to transport the gas from the Vaca Muerta shale gas reserves to liquefaction and ultimately to a shipping port. In doing so, the JDA creates a collaborative work plan outlining the respective roles of the parties for the next phase of development.
While previous announcements regarding LNG initiatives in Argentina may seem similar to the current initiative, there are reasons why this announcement is seen as having more substance or continuity. The companies have elected to commit themselves to completing the necessary engineering and commercial feasibility studies required to establish whether the proposed project is viable.
How does this phase of development raise the bar on the level of expectation?
Prior to now, the parties were preparing to initiate the feasibility study phase of the project. For the first time, the parties are preparing to enter into the Front-End Engineering Design (FEED) phase of the project, which represents a critical juncture where the project is determined to be viable, and where the costs, timeline, and export capabilities of the project are determined.
Two figures illustrate the scope of the project: 12 million tons per annum (mtpa) of LNG capacity and two floating LNG units capable of delivering 6 mtpa each.
These figures are not simply conceptual – if successful, they would position Argentina as one of the largest future LNG exporters, assuming the project reaches a final investment decision (FID) by the second half of 2026.
This phase of development introduces new dynamics
XRG’s formal inclusion adds to the financial and technical capabilities of the partnership, increasing the credibility of YPF’s ambition and providing Eni with additional global LNG experience.
At this point, the objective is clear: develop the Vaca Muerta shale basin and create a permanent export platform based on a combination of production, processing, transportation, and liquefaction infrastructure. The JDA serves as the bridge that transforms the geologic advantages of the Vaca Muerta shale basin into a reality of exporting the hydrocarbons.
Leadership within YPF has emphasized that the project is developing as one of the most compelling global LNG opportunities due to the strengths of the parties. If Eni and XRG can keep working together in harmony, it is possible that Argentina will be able to go from having great potential for exporting natural gas to actually doing so. In other words, the pace of the transition to a country capable of exporting LNG will depend on how the partners progress, and will lead to additional issues and concerns as the future LNG road map for Argentina evolves.
